Blog Post

COVID-19: Amending Physician Contracts Executed during the Surge

Covid 19 Amending Physician Contracts Web

The public health emergency (PHE) brought on by COVID-19 has had a profound impact on physician services contracts. In a recent blog post, ECG examined questions concerning pre-PHE contracts that rely on productivity. In this post, we address client questions about the agreements executed or modified during the PHE that relied on the Stark law blanket waivers; specifically:

  • When should these agreements be sunsetted?
  • What documentation should providers retain when relying on the blanket waivers?

Duration of Agreements that Rely on the Waivers

The blanket waivers, issued by the Centers of Medicare & Medicaid Services (CMS) retroactive to March 1, 2020, acknowledge situations in which traditional FMV requirements may impair a health system’s ability to meet patient needs in response to the PHE. The waivers offer flexibility to temporarily allow what might otherwise be regarded as impermissible arrangements by removing the requirement to comply with FMV.

Consequently, pre-COVID-19 arrangements can be amended during the PHE and, after the PHE is lifted, amended again to return to original terms; or conversely, amended to what might represent the best expectation of future performance after the PHE.

COVID-19-prompted arrangements often stipulate a time frame. Since it is impossible to accurately predict the end date of the PHE, it is likely that some of these temporary agreements will still be in place once the PHE is over. When possible, the duration of the temporary agreement should be coterminous with the PHE. However, when that’s not feasible, the duration of the temporary agreement must still be commercially reasonable.

Healthcare organizations that relied on the blanket waivers should transition those temporary arrangements to FMV-compliant terms once an official end to PHE has been declared.

PHE Waiver Documentation

Even though the waivers may be relied upon without advance notice or submission of any specific documentation to CMS, thorough documentation is essential whenever a waiver is used. Further, this documentation must be made available to CMS upon its request. We recommend adding a statement regarding documentation and FMV requirements under PHEs to your organization’s policies and procedures.

Documentation related to contracts and amendments executed during the COVID-19 PHE should include, but not necessarily be limited to, the following:

  • To the extent possible, a description of the nature of the emergency circumstance and why reliance on the waiver was deemed necessary in each case
  • When feasible, especially for specialties that are not on the front lines, reports documenting the results of the following:
    • Analysis of the financial feasibility of meeting the current and anticipated health needs of the community (e.g., coverage needs, expected costs, hazard pay)
    • A data-driven analysis and/or research to support temporary payments, particularly if they exceed typical levels or rates
  • For arrangements that rely on the waiver to be above FMV, such as paying premium rates or protecting historical compensation, a documented review of commercial reasonableness with legal counsel or a knowledgeable third party

ECG continues to monitor our country’s response to the COVID-19 pandemic. Visit our COVID-19 thought leadership page regularly for trusted advice on how healthcare leaders and providers can weather this crisis.